We do not expect the
weakness witnessed in
2013, but a difficult
February 2015 thus far
warrants another look
at assessing interest
rate risk, especially
given the likely start of
Federal Reserve (Fed)
interest rate hikes later
this year.
Sector allocation,
maturity exposure, time
horizon, and whether
interest income is
reinvested or simply
spent, all influence
potential total returns
during a potential bear
market for bonds.

We continue to expect
housing may add to GDP
growth in 2015 and for
the next several years,
as the market normalizes
following the severe
housing bust of
2005 – 2010.
Poor weather in Q1 2015
may again cause housing
to be a drag on growth
early in 2015.

The market’s continued
ascent has caused
some to ask if the stock
market reflects
excessive optimism.
The pace of economic
surprises as measured by
the Citigroup Economic
Surprise Index suggests
expectations remain
reasonable.

Puerto Rico municipal
bond price volatility
picked up following the
strike down of the
restructuring law, as
the market began to
price in the prospect of
a broader default.
The impact on the
broader municipal market
is still limited, as has
been the case for much of
the past 18 months.
Default risk for Puerto
Rico remains but we still
find the broader municipal
bond market attractive.